### Law Offices of



# Timothy H. Bellas, LLC

A LIMITED LIABILITY COMPANY

_________________________________________________________________________________________________________ Cactus & Botones St., Garapan Telephone No. (670) 323

- 211 5

P.O. Box 502845 Facsimile No. (670) 323

- 2116 Saipan, MP 96950 Email: tim@bellaslaw.net

February 1, 2012

Ms. Lauralyn J. Remo Chief, Air Carri er Fitness Division Office of Aviation Analysis Department of Transportation Washingto n D.C

. 20590

Re: Response to Your Letter of January 3. 2012, Docket DOT

- OST

- 2010

- 0235

, Star Marianas Air, Inc . Application

.

Dear Ms. Remo:

I n response to your first letter of September 16th, 2011 (" September letter") and in an effort to

resolve this ma tter as expeditiously as possible

, Star Marianas, Air, Inc. ("SMA ") adopted a very conciliatory posture. Thus, in deference to your comments that without a written agreement in place

, undue influence could be inferred over SMA. Therefore, at some expense to SMA, an Air Charter Agreement ("ACA") was drafted between it and the Tinian Dynasty Hotel and Casino ("TDHC"). The ACA was supplied to you once it was executed by the representatives of both parties. In response to that document we have received your la test letter, dated January 3, 2012 ("January letter").

T his process began when SMA filed its application for commuter authority and in compliance with 49 U.S.C. § 40102(a)(15) stated that the ownership and control o f SMA was vested in U.S.

citizens or ent ities.

More specifically, SMA has affirmatively represented that: (1) it is a corporation organized

under the laws of the Commonwealth of the Northern Mariana Islands ; (2) that the president and

all of the members of the board of directors are citizens of the United States and that (3) 100% of

the SMA ’s stock is owned and controlled by United States citizens.

The above referenced subsection of § 40102 defines a citizen of the United States as "(1) an individual who is a citizen of the United States; (2) a partnership each of whose partners is an individual who is a citizen of the United States; or (3) a corporation or association organized under the laws of the United States or a state, the District of Columbia, or a territory or possession of the United States, of which the president and at least two

- thirds of t he board of

directors and other managing officers are citizens of the United States, which is under the actual control of citizens of the United States, and in which at least 75 percent of the vot ing interest is owned and controlled by persons that are citizens of the United States.”DOT Response Letter

- Ms. Remo

February 1, 2012 Page 2

Furthermore, SMA declared that it has no debt or other obligation , owed to a foreign person or entity . T here ar e no other owners, officers, directors, or other persons who have the power to influence SMA, whether through ownership, debt, position held, or any other interest, that are foreign.

Therefore, the affirmative representations of SMA in its application an d subsequent submissions to DOT meet and exceed the requirements of the statutory definition

.

Your initial response was to challenge the relationship between SMA and TDHC

. A pparently

, the basis of such challenge being that former employees of another enti ty owned by TDHC may have been employed by SMA or that TDHC 's business relationship, as major customer of SMA

, results in some influence or control over SMA , unless there is written ACA

.

I t is within this historical context that we have received your Janu ary letter which purports to criticize the ACA and to render opinions on legal issues encompassed by the ACA. It is unclear whether your criticisms of the ACA are based on your personal considered opinion of the contract law applicable to the CNMI or wheth er you have obtained an opinion from an outside source to support your comments. In either event, I address each issue raised in the January

letter.

I. SMA Is Not Free to Provide A i r Charters to Other Customers

.

Apparently, this comment implies that beca use SMA's right to provide services to other customers is not specifically stated in the ACA, it can only provide air charter services to TDHC.

T he general purpose of a contract is to define the affirmative promises of each of the parties

based on its term s and provisions. While such promises may include a promise to refrain from doing some action

, such a provision would still need to be affirmatively stated in the contract and not simply implied from the mere absence of the term

. The January letter suggest s that SMA has agreed to restrict its freedom to contract with all other customers because the ACA does not provide an affirmative term ensuring SMA's freedom to do so. In view of the substantial

detrimental economic effect on SMA

, such an interpretation o f the ACA is not reasonable. For this to be true, the ACA contain a term providing for such exclusive air services to TDHC. The generally accepted interpretation of these circumstances would be that in the absence of such an express restrictive provision, SMA is free to deal with any other party.

Attached hereto as Exhibit 1, is a listing of t he total flights flown by SMA for the fourth quarter of 2011. These statistics have previously been reported to the Commonwealth Port s Authority

and were, therefore

, not compiled solely for purposes of this letter. As you can see over 40% of the flights flown by SMA are for customers other than TDHC. Therefore, SMA does in fact exercise the freedom and autonomy to provi de air charter services to customers other than

T DHC.

///DOT Response Letter

- Ms. Remo

February 1, 2012 Page 3

II. Adjustable Terms of Payment in the ACA

.

The next comment concern s the provision in the ACA, that SMA has the right to adjust the

c h arter rate to be paid by TDHC for the air charter servi ces

. First, it should be remembered that SMA did not have a written agreement in its relationship with TDHC because there are various factors, such as cost of fuel, port fees and local taxes which affect the cost of services provided by SMA. The increase in those costs are beyond the control of SMA and therefore allowing the parties to negotiate changes in charter prices was the norm and this position is still preserved by the terms of the ACA. Second, the ACA contemplates that TDHC will essentially agree to the increase which is based on a set of cost factors which will have changed and therefore justify the change. Otherwise, SMA has the unilateral right to terminate the ACA. Under this scenario, if the business relationship is to continue, between the t wo entities, a new agreement would be necessary and the parties would then have to mutually consent to the new charter price.

Lastly, the inclusion of this term in the ACA is detrimental to TDHC and favorable to SMA. If the ultimate position of DOT were correct, that TDHC exercises s ome infl uence or control over SMA, then logic would dictate that TDHC would coerce SMA to accept terms which were beneficial only to TDHC, not the other way around

.

III. Continuation of Service Even If Payments Delinquent

.

T he January letter also raises concerns about provisions in the ACA under which SMA may continue to provide air charter services when payments for past services are delinquent and that services can be reinstated by simply b ringing unpaid accounts current, a s being possible indications of undue influence or control over SMA by TDHC.

As previously stated in SMA's response, Tinian has a very limited resident population and the operations of SMA are geared toward the customers of TDHC who are predominantly

int ernational passengers arriving in Saipan and thereafter in need of transportation to Tinian. 1

SMA believes all businesses which derive their income from the tourist industry have a responsibility to maintain and support Tinian as a viable destination whe re tourists may gamble, dine and enjoy Tinian's other tourist attractions. Yet a tourist would be hard pressed to return to

or recommend such a destination to another traveler if that person were stranded there and

missed their return fl ight to their coun try of origin. For this reason, the ACA reserves the option

to SMA to return such individual s back to Saipan so that they can return to their homes

.

However, the ACA does impose sanctions on TDHC, when there are delinquencies. First, SMA will not fly any further flights from Saipan to Tinian for TDHC to bring in new customers in. Second, when it elects to return the potentially "stranded" passengers to Saipan, TDHC is billed at the higher rate of $250 per flight, rather than the normal $175 charge. (See A ttachment1 of the ACA)

1 There is no public transp ortation between Saipan and Tinian, the only option is by private air service.DOT Response Letter

- Ms. Remo

February 1, 2012 Page 4

IV. Language Translation Provision.

The January letter then discusses a boiler plate provision in the concluding paragraphs of the ACA regarding translation of the document. T hose paragraphs state:

FURTHERMORE, EACH PARTY IS SOLELY RESPONSIBLE FOR TRANSLATING

THIS DOCUMENT INTO ANY OTHER LANGUAGE AND THE FAILURE TO DO SO

WILL NOT BE A DEFENSE TO THE ENFORCEABILITY OF THIS DOCUMENT.

IF THE DOCUMENT IS SO TRANSLATED IT IS AGREED THAT THE ENGLISH

VERSION SHALL BE BINDING ON THE PARTIES IF THERE IS ANY CONFLICT

BETWEEN IT AND ANY TRANSLATION.

The January letter once again raises "customary contract arrangements" but fails to specify any authority for this broad and sweeping statem ent. Nor does it specify the community to which this broad policy is applicable. The CNMI is a jurisdiction with many persons residing here who speak several languages other than English. Furthermore, English is only one of the three official languages of the CNMI. Therefore, in this legal community it is considered good practice to include such a provision in contracts in order to show that any party which may not have English as their primary language was afforded ample opportunity to have the English ver sion translated into their native language, to avoid a later claim that the contract was signed by a party but the party was not fluent in English and did not understand all its terms and should not be fully bound by its terms. Secondly, the above language does not state that the ACA was in fact translated into any other language; it merely states "IF" such translation occurs then the English version of the contract is controlling. This is also normal practice since the party who does not need translation

s hould not be held accountable for inaccuracies in any translation done for the other party. Nor should inaccuracies give rise to a defense that the contract was not understood when signed.

Conclusion:

As stated above, SMA has made its application for co mmuter authority and certified that it is owned, controlled and operated by U.S. citizens entirely

. While it did not see the necessity for a

air charter contract

, it drafted one in response to DOT's suggestion that one was needed to establish the independe nce of SMA from TDHC. The January letter then proceeded to suggest

that certain provisions of the contract , now establish some vague influence or control of SMA by TDHC. This response letter has rebutted all of these innuendos of influence or control. If D OT has some evidence other than unfounded suspicions of t his influence or control then those facts should be placed on the record so that they can be confronted head on.

We emphasize again, that SMA's air service is not exclusi vely for the benefit of TDHC as it provides air service to other customers, including the residents of Tinian

. While SMA is not a large company by external standards, within the Tinian community, it is a major source of

commerce and tax revenues for that island. Even without taking i nto account the loss of customers to TDHC and the revenue to the local economy from that source , the denial of the commuter authority requested by SMA will represent a major decrease in the public and privateDOT Response Letter

- Ms. Remo

February 1, 2012 Page 5

revenue for the local community as well as the local government. In this time of economic decline, this community can ill afford to lose a business with such significant contributions to the local economy, especially based on unarticulated suspic ions.

Because this issue is of such vital economic importance to the community of Tinian, the local political leaders of Tinian, as well as our Representative in Washington D.C. have been apprised

of the status of this matter.

We look forward to your positive decision in this matter because it would be the correct decision. However, if you decide otherwise then we are prepared to pursue the matter to the next level.

Sincerely,

Timothy H. Bellas

cc: Hon. Gregorio C. Sablan, Representative U.S. House of Representatives Tinian Delegation, House and Senate CNMI Legislature

Hon. Ramon Dela Cruz Mayor of Tinian

Client

File

ATTESTATION

The factual contents of this letter are true and correct to the best of my knowledge and belief. Pursuant to Title 18 United States Code Section 1001, I Shaun Christian, President of Star Marianas Air, Inc., in my individual capacity and as the authorized representative of SMA, verify

that I have not in any manner knowingly a nd willfully provided any falsified, fictitious, or fraudulent statement or knowingly used any documents which contain such statements in

connection with the preparation, of this letter. I understand that an individual who is found to have violated the pr ovisions of the 18 U. S.C. S ection 1001 shall be fined or imprisoned for not more than five years, or both.

Dated : 2

- 2

- 2012

____________________________ Shaun Christian, President Star Marianas Air, Inc.EXHIBIT 1

Total Flights Flown by SMA in 4th Quarter, 2011, as reported to C OMMONWEALTH P ORTS A UTHORITY

October 2011 November 2011 December 2011

Total Flights* 2,640 3,119 3,347

TDHC Chartered 1,563 1,742 1,864

Other Flights* 1,077 1,377 1,483

Percentage of TDHC

Chartered 59.2% 55.9% 55.7%

Percentage of Other (non

- TDHC) Chartered 40.8% 44.1% 44.3%

*Does not include training flights or uncompleted flights due to weather

ATTESTATION

The contents of this exhibit are true and correct to the best of my knowledge and belief. Pursuant to Title 18 United States Code Section 1001, I Shaun Christian, President of Star Marianas Air, Inc., in my individual capacity and as the authorized representativ e of SMA, verify that I have not in any manner knowingly and willfully provided any falsified, fictitious, or fraudulent statement or knowingly used any documents which contain such statements in connection with the preparation,

of this letter. I understa nd that an individual who is found to have violated the provisions of the 18 U.S.C. Section 1001 shall be fined or imprisoned for not more than five years, or both.

Dated : 02/01/2012

____________________________ Shaun Christian, President Star Marianas Air, Inc.